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Microlesson · 5-min read

AS 20 – Weighted Average Shares: Timing Rules

## AS 20: When to Include Shares in the Weighted Average Denominator

The denominator of Basic EPS is the weighted average number of equity shares outstanding during the period. The weight assigned to each tranche of shares depends on when those shares effectively participate in earnings.

### Timing Table

Basis of issueInclude from
Issued for cashDate cash is receivable (not the allotment date)
Issued for conversion of debenturesDate of conversion
Issued against interest / principal repaymentDate interest / principal ceases to accrue
Issued in settlement of a liabilityDate of settlement
Issued for acquisition of an assetDate the acquired asset is recognised
Issued for services renderedDate services are rendered

> Key principle: Shares enter the denominator at the point the entity receives the economic benefit that those shares represent.

### Special case – Bonus shares / Stock splits

Bonus shares carry no time weight. They are treated as if they existed from the beginning of the earliest period presented. Prior-year EPS figures must be restated accordingly.

Worked example

### Example 1

Example (Cash issue): New shares announced on 01-Jul; cash receivable on 01-Aug. Include shares from 01-Aug (5/12 weight), NOT from the announcement date.

### Example 2

Example (Conversion): Debentures worth ₹10 L converted to equity on 15-Sep. The new equity shares enter the weighted average from 15-Sep (3.5/12 weight).

⚠️ Common exam mistakes

  • Using the board-resolution date instead of the cash-receivable date for fresh public issues.
  • Applying a time weight to bonus shares — bonus shares always get full-year weight (or are treated as outstanding from the start of the earliest period presented).
  • Forgetting to restate prior-year EPS when bonus shares are issued after the balance-sheet date but before the financial statements are approved.
Reference: Paras 15–20 (Weighted Average Number of Shares) — AS 20 – Earnings Per Share
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